The High-touch Legal Services® Blog…for Startups!

© 2009-2018 Dana H. Shultz, Attorney at Law

FTC Says Gag Clauses Violate Federal Law

Seal of the Federal Trade Commission, which filed a Complaint about gag clausesLast year, I wrote about a California law that prohibits non-disparagement clauses in consumer contracts. (See Consumer Non-disparagement Clauses Nixed in California.) Recently, the Federal Trade Commission took the position that such “gag clauses violate federal law, as well.

Roca Labs’ Obesity Treatment

Roca Labs, Inc. claims that it has an alternative to bariatric surgery as a treatment for obesity. Roca says that its “proprietary regimen decreases hunger motivation, decreases urge to eat, and reduces gastric capacity by 45% to 65%.”

The Federal Trade Commission recently filed a Complaint against Roca in the Federal District Court for the Middle District of Florida.

FTC Complaint re Gag Clauses and More

The Complaint alleges that Roca’s weight-loss claims are deceptive and that Roca’s gag clauses violate the FTC Act.

According to the Complaint:

  • Roca has warned purchasers, through package inserts included in product shipments, that they agreed not to write any negative reviews about Roca or its products and would owe Roca hundreds of dollars should they do so (the gag clauses).
  • Roca has also issued legal threats and filed lawsuits against complaining purchasers, alleging that the purchasers would violate or
    had violated the gag clauses to which they purportedly agreed.
  • These practices have caused or are likely to cause purchasers to refrain from commenting negatively about Roca or its products. By depriving prospective purchasers of this truthful, negative information, Roca’s practices have resulted or are likely to result in consumers buying Roca Labs products they would not otherwise have bought.
Violation of FTC Act

The FTC alleges that such practices constitute unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a) and (n). The FTC’s requested relief includes, among others:

  •  A temporary, preliminary, and permanent injunction to prevent future violations of the FTC Act.
  • Refund of amounts paid by consumers and disgorgement of amounts received by Roca.
  • The FTC’s recovery of is costs to bring this action.

This particular suit against Roca is significant. However, what is more significant, for the purposes of this post, is the FTC’s position that gag clauses cause harm to consumers, thus they violate the FTC Act.

Update:

On January 4, 2019 the FTC received a Final Judgment and Order for Permanent Injunction and Other Equitable Relief in its favor.

Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.